Late baby boomers — those born between 1960 and 1965, at the tail end of the post-World War II Baby Boom — are not faring well when it comes to retirement savings. That’s according to a report published earlier this month by the Center for Retirement Research at Boston College, which extends by a year the end of the Baby Boom most commonly cited.
Late boomers, who are now nearing retirement age, would be expected to lag behind their elders due the increase in Social Security’s full retirement age, the shift from traditional pensions and higher housing costs, according to the report. At the same time, those folks, now in their late 50s and early 60s, were expected to have higher 401(k)/IRA assets compared with mid boomers at the same age.
“Strikingly, though, late boomers have seen a drop in their 401(k)/IRA assets. The questions are, why is their 401(k)/IRA wealth lower, and what do the patterns mean for younger cohorts,” said the Center for Retirement Research authors, Senior Research Economist Assistant Director of Savings Research Anqi Chen, Director Alicia H. Munnell and Senior Research Economist Laura D. Quinby.
The McKnight’s Business Daily previously reported on a study by Allianz Life Insurance Co. of North America that found that Americans are facing a “new retirement reality” brought on by economic challenges such as inflation, market volatility, financial crises and fears of bank failures. The Great Recession, between 2007 and 2009, hit younger boomers hard “due to a weakened link between work and wealth,” according to that report. Those workers were in their 40s at the time.
“This was meant to be an age when late boomers earned the most and saved more for retirement. But because … many lost their jobs, or had to accept lower-paying jobs, (they) were less likely to participate in a 401(k). So they could not accumulate enough, setting many of them back,” Center for Retirement Research study author Chen told Yahoo Finance.
Shifting demographics also played a role in this cohort’s lack of wealth, according to the report. The authors noted an increasing share of Black and Hispanic households that earn less than their white counterparts and a declining share of households that with married people who have college degrees.
“This is not a tale of the deteriorating status of Black and Hispanic households,” authors noted. “Indeed, the wealth of non-white households has increased relative to their white counterparts. But Black and Hispanic households have less wealth than white households, so when they increase as a share of the total population, average cohort wealth will decline.”
“Similarly, a decline in the percentage of households married or with a college degree will bring down the average,” they added. “These changing demographics, along with a decline in work activity, accounted for 29% of the total decline.”
